Functions of the Certified Public Accountant
by JOHN S. SCHUMANN Partner, New York Office
Presented at a Luncheon Meeting of the Sullivan & Cromwell staff, New York—March 1967
WHEN INVITED to meet with you today, I was asked to talk about the function of the certified public accountant in relation to the financial
statements of clients—in other words, to discuss what accountants do and what they do not do. I was not asked to philosophize about the contribution
of professional accountants to the workings of the business world, nor to try to defend the profession in a climate where those who make bad investments seem to think that we are the patsies who will make good losses due to investors' errors in judgment or to their stupidity. We can discuss this hostile climate, if you wish, but for the present I will try to stay with the assigned subject.
As a basis for discussion, I think we should all keep in mind that public accountants are not "accountants" in the simple sense of the word. We do not "account" for our client's operations.
THE ACCOUNTANTS' OPINION
By far the most important service we render—in terms of the amount of effort put forth and of our estimate of contribution to the public—is in expressing an opinion on representations of the management of our clients. Our services are in auditing. Management "accounts"— we "examine." Without further reflection, you might consider that the distinction is in the words only. That distinction is all-important, however, to any understanding of the function of a public accountant, and it does bear on some of the matters to be discussed today.
The management of a company is paid to operate the company and to report results and financial condition to the stockholders—the owners. As auditors, we are employed to review management's representations of those results and of condition and to express an opinion on our appraisal of management's representations in making the display. Management keeps the necessary records to make its report—we do not. Management selects the principles of accounting to be employed where there are alternative
practices—we do not. Management proudly or shamefacedly reports
to the owners—we do not. Our function is to make an independent